Garlington Technologies Inc.’s 2013 financial statements.

Garlington Technologies Inc. Pro Forma Income Statement December 31, 2014 Sales $4,140,000 Operating costs $3,817,872 EBIT $322,128 Interest $18,276 Pre-tax earnings $303,852 Taxes (40%) $121,541 Net income $182,311 Dividends: $116,000 Addition to RE: $66,311

Garlington Technologies Inc. Pro Forma Balance Statement December 31, 2014 Cash $180,000 Receivables $396,000 Inventories $792,000 Total current assets $1,368,000 Fixed assets $1,440,000 Total assets $2,808,000 Accounts payable $396,000 Notes payable $174,248 Accruals $198,800 Total current liabilities $769,048 Line of credit $198,800 Common stock $1,800,000 Retained earnings $270,152 Total liabilities and equity $2,808,000

Calculation: Sales: $3,600,000 + 15% = $4,140,000 Operating costs: $3,279,720 + 15% = $3,817,872

EBIT: $322,128 Interest: $174,248 x 13% = $22,659 Pre-tax earnings: $322,128 – $22,659 = $299,469 Taxes: $299,469 x 40% = $119,787 Net income: $299,469 – $119,787 = $179,682 Addition to RE: $179,682 – $116,000 = $63,682

Line of Credit: $198,800 = $63,682 + $135,118

Receivables: $360,000 x 15% = $54,000 Inventories: $720,000 x 15% = $108,000 Accounts Payable: $360,000 x 15% = $54,